Asked by Banaz Fetah on May 10, 2024
Verified
The following price quotations were taken from the Wall Street Journal. Stock Price Strike February Price 917/88573/8917/89031/8917/8955/8\begin{array}{rrr}\text { Stock Price}&\text { Strike }&\text { February }\\&\text { Price }&\\917 / 8 & 85 & 73 / 8 \\917 / 8 & 90 & 31 / 8 \\917 / 8 & 95 & 5 / 8\end{array} Stock Price917/8917/8917/8 Strike Price 859095 February 73/831/85/8 The premium on one February 90 call contract is
A) $3.1250.
B) $318.00.
C) $312.50.
D) $58.00.
Premium
An amount paid in excess of the face value or regular price, often associated with insurance costs, bonds above par value, or superior quality.
Strike Price
The predetermined price at which the holder of an options contract can buy (call) or sell (put) the underlying asset or security.
Stock Price
The cost of purchasing a share of a company's stock, which fluctuates based on supply and demand in the market.
- Recognize and analyze the determinants that affect the pricing of an option premium.
Verified Answer
KC
Kathy CabreraMay 14, 2024
Final Answer :
C
Explanation :
The premium on one February 90 call contract is $31 / 8 or $3.125 per share. Since one contract typically represents 100 shares, the total premium is $3.125 * 100 = $312.50.
Learning Objectives
- Recognize and analyze the determinants that affect the pricing of an option premium.